A Game Theoretical Study on Pricing and Production Decisions of Firms

Today, products’ lead time adjustment has become one of the main challenges for organizations managers and service companies. products’ lead time has an undeniable impact on firms’ inventory control way in order to meet required customer demand. in addition, pricing on manufactured good way, in order to achieve most profit and decrease the side expenditures, is of issues of importance in this context. in this research, market demand, is considered sensitive to product sales price and amount of inventory-on-hand and we have addressed to analyze the behavior of firms by assuming being unauthorized of shortage. it should be noted that in both scenarios, firms’ decision making review about appropriate lead time optimal policies, products’ price and amount of inventory as the problem decision variables with the aim of maximizing profits and minimizing costs are addressed. in first scenario, only a single firm behavior analysis is considered and in second scenario, two firm’s behavior study when changing in price level, lead time and inventory at exclusive market have been addressed by using nash equilibrium. in the following, by expressing numerical examples, we have addressed to the problem results analysis and have determined optimal points. sensitivity analysis clearly shows market potential and inventory attraction parameters influence on the decision variables. eventually, it was found that among two proposed scenarios, single firm’s scenario is more profitable than the two firms’ scenario. this research can be helpful for planners and industrial managers to optimize existing conditions, achieving maximum profit.